How Fracking Contributes To Oil Glut, Cheap Fuel For You And Me

Driving down the U.S. east coast, getting away from the cold north, warming up in sunny Florida, I could hardly believe the price of gasoline.

Prices seem to be descending by the day. At some stops you could buy a gallon for less than two dollars. That’s nearly half the cost of when I was last in the U.S. a few months ago. For the benefit of most of the rest of the world, let’s do the math. One gallon equals 3.785 liters. In other words, very approximately, you would be spending slightly more than 50 cents a liter in local currency.

For the average consumer, the plummeting price of oil is very good news. Renting cars of varying shapes and sizes on visits to the U.S., I think about the price for a tank of gas almost as much as the cops lying in wait for speedsters and the hot-rodders whizzing by on the interstates and turnpikes I’m old enough to remember when I was a kid seeing gasoline costing about 20 cents at the pump.

Taking account for inflation, I would be delighted to see gasoline go down to about a dollar a gallon, half its current price. As far as consumers like me are concerned, the cheaper, the better.

Yes, I know, what seems good for the typical consumer is not necessarily good for the global or just the American economy. Oil-and-gas producing countries such as Russia, Nigeria, Iran and Venezuela, counting on oil to balance their precarious budgets, are suffering. OPEC seems to have given up on demanding prices go one way or another, leaving Saudi Arabia, the single biggest, most powerful oil producer, to decide for itself. The Saudis, of course, resist lowering production for fear of losing market share if prices rise again.

Saudi Arabia is so important, so valuable in terms of America’s interests, that President Obama is shortening his visit to India to attend the funeral of Saudi Arabia’s long ruling King Abdullah. Saudi Arabia may be a monarchy, one of the world’s harsher dictatorships, but no one doubts its importance for U.S. interests and policies as a pro-western kingdom in a region roiled by conflict.

The U.S., however, may no longer be quite so dependent on Saudi oil. In conversations on the way, I keep hearing the phenomenon of fracking, of drilling for oil and gas in shale deposits, is having a revolutionary effect on oil production in the U.S. and elsewhere. By now, we’re told, the U.S. is producing about as much oil as it did 40 or 50 years ago.

So where’s the downside? The answer is that prices have been going down so much that frackers, including some of the world’s biggest, are simply not getting a large enough return on their investment to justify the huge costs. A number are either cutting down on their activities or getting out of the business.

Spending as much as $10 million for a single well, two oil companies announced last month they are pulling out of the Tuscaloosa marine shale in central Louisiana. In Pennsylvania, investors with visions of quick earnings are holding off. Stephen Saunders, an attorney for landowners, was quoted as saying one result has been “to cull the ranks of people who are seriously doing oil and gas work and those who may have been dabbling in it.”

But hasn’t the revolution in oil been a contributing factor in reviving the American economy, pulling it from the doldrums of recession a few years ago? Somehow we keep hearing so many other reasons for market recovery. For this consuming traveler, there’s absolutely no convincing argument that the decrease in the price of gas can be a Bad Thing.

No doubt there are doubts – fears about the impact of all that drilling on the environment, on nearby communities, on the earth on which people have to live and work. There are worries that fracking will lead to tremors, perhaps earthquakes. Decades or centuries hence, no telling what the earth will look like. Apres nous, le deluge?

Ok, so where will all the fracking end? Shale formations exist in many different regions, both on land and below water. Not all formations contain huge quantities of oil or gas, but the means exist for extracting whatever’s there, and the technology is getting better all the time. The U.S. over the past decade has rebounded from an oil-deficit country to almost an oil-surplus country.

Others are sure to want to follow.If the ultimate consequences remain uncertain, for now consumers worldwide have got to take a positive view. Sorry, but when I hear on the car radio the “volatile” stock market has gone down a little thanks to a decline in the price of crude, I just can’t get too excited. I’ve got my eyes on the next roadside sign in neon posting gasoline prices at less than two dollars a gallon. Who needs to pay $2.07 a gallon as some places are posting off one of the Florida interstates, when the signs a few miles down the highway are advertising $1.97?

And that’s to say nothing about potential declines this winter in the price of gas needed to heat homes, offices and factories on the way.

I have reported from Asia since covering the "Year of Living Dangerously" in Indonesia, 1965-66, and the war in Vietnam, Cambodia and Laos in the late 1960s-early 1970s for newspapers and magazines, including the Chicago Tribune and the old Washington (DC) Star. I also wrot...